Not All Buyers Are Created Equal: The Mindset of the Serious Buyer
Just as every person is different, the same invariably holds true for buyers. No two buyers are the same. Further, no two buyers have the same mindset, emotional makeup, or approach to business. The simple fact is that buyers opt to buy businesses for a very wide range of reasons. The bottom line is that it is up to business brokers and M&A advisors to find serious buyers so as not to waste everyone’s time. In this article, we will examine how we zero in on serious buyers.
A serious buyer, one that wants to achieve success and isn’t just window shopping, will want to understand both the business they are considering buying and the industry as a whole. Consider this rough analogy for a moment. Someone serious about winning a game will work to understand the rules before jumping in and playing. You’ll want to look for a buyer who wants to understand the strengths and weaknesses of a business. He or she will also want to comprehend the strengths and weaknesses of competitors as well as potential industry wide problems both now and in the future.
Savvy business people realize that wages and salaries make up a huge percentage of the typical business’s operating cost. A serious buyer will endeavor to understand not just the wages and salaries of employees, but also additional related costs. These can include retirement related costs, the cost of training new employees, the rate of employee turnover and more. Smart buyers are looking for stability throughout the business, and that includes its employees.
The kind of buyers you want to attract are the ones that are not just “thinking about buying” a business. You’ll want to only deal with buyers who have carefully thought through what it means to buy a business. A key aspect of buying a business, as simple as it sounds, is to fully understand what is being sold. For example, serious buyers will dive in and understand capital expenditures. They will also examine and evaluate machinery and equipment so that they understand what kinds of equipment might need to be repaired or replaced. Replacing and repairing equipment can mean substantial costs. That’s why quality buyers can be expected to evaluate all equipment extremely carefully.
Buyers who understand what it means to buy a business will even go beyond evaluating the stability of employees and the state of machinery and equipment. You can expect a serious buyer to want to know if there are any environmental concerns, they will check and evaluate the lease, and they will want to inspect the state of all buildings. They will want to know who the key clients and key suppliers are and determine if those relationships are stable or if they put the business at long term risk.
At the end of the day, the kind of buyer that you’ll want to work with is a buyer who is proactive. Quality buyers will be accessing every aspect of a business to determine its long-term viability. A buyer who goes far beyond “kicking the tires” is exactly the kind of buyer you want.
Copyright: Business Brokerage Press, Inc.
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Important Factors to Consider in Your Lease
Owning and operating a business can be rather demanding and that means from time-to-time details can slip through the cracks. All too often, businessowners don’t fully comprehend their leases and this can lead to a variety of problems. For example, if your business location is a key part of your success, it is incredibly important that you are well aware of all the essential points in your lease. Many businesses, ranging from restaurants and service businesses to retail stores, can be very location sensitive.
Don’t Let Key Details Slip by You
Regardless what kind of business you own, it is vital that you understand every aspect of your lease. You may even have to get an attorney involved to help you understand the implications of the minor points. A failure to do so could translate to the failure of your business.
The Length of Your Lease
The length of your lease tops our list of lease related factors you need to understand. While there are many variables that will affect you, in general, the longer your lease the better. It should come as no surprise that a longer lease gives your business an increased level of stability.
Exit and Exclusivity Clauses
If you are negotiating a lease, it is prudent to include an option for getting out of the lease. Just as having a longer lease provides you with greater flexibility, the same holds true for being able to exit your lease if the need arises.
A lease is not a one-dimensional document, just as your location is not one-dimensional either. The location in which your business is located matters. If you are signing a lease to locate your business in a strip mall or shopping mall, you should try to have written into your lease agreement that you are the only business of your type that will be located in the mall. After all, the last thing you want is to see a similar business opening up nearby.
Transferring Your Lease
Negotiating a long lease and having a way out of your lease are critically important, but so is being able to transfer your lease. At some point in the future, you may need to sell your business. For this reason, it is in your interest to have a clear understanding of how, and under what circumstances, you can transfer your lease to a new owner.
It is important to discuss the possibility of selling your business with the landlord before going to market to understand if the lease will be able to convey. While the landlord cannot restrict the sale of your business, you could get left holding a personal guarantee in order for the lease to remain in place for the remainder of the existing lease term. Then the new owner would be left to negotiate the lease renewal on their own.
Assignment of Responsibilities
Rounding out our list of key factors to consider for your lease are what you are responsible for and what the landlord is responsible for handling. If you as the business owner are to shoulder responsibilities related to the property, then those responsibilities should also be clearly outlined in the lease.
There is no doubt there are many variables involved in owning and operating any business. The physical location of your business should be among your top concerns. You should do everything possible to understand your lease. When signing a new lease, try to negotiate a lease that will be as helpful to you as possible.
Copyright: Business Brokerage Press, Inc.
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3 Warning Signs for Sellers to Be Aware Of
If you’re getting ready to sell your business, you’ll want to be on high alert for potential warning signs that could potentially derail the deal. Of course, time is of the essence when it comes to finalizing your deal. Why spend time negotiating with a buyer who is either not really interested or is simply not qualified to buy? Let’s take a look at some of the top buyer warning signs.
1. Lack of Buyer Experience
When it comes to individual buyers, you’ll want to see if they have experience in your industry. If a prospective buyer is not knowledgeable about your business, they might initially seem very excited but then get cold feet once they dive in and learn more about the industry.
The same can be said for a potential buyer who has never purchased a business before. If you’re dealing with a newbie, you’ll want to feel confident that this individual understands the ins and outs of buying a business before you dedicate too much time to their deal. After all, the process of buying a business can be long and complicated. Inexperienced buyers might find that they no longer want to continue progressing once they get a better idea for what is involved.
2. Undisclosed Financial Information
Along similar lines, you’ll want to work with a buyer who is open about their financials. If you are denied access to financial statements, you will have no way to verify that this buyer is actually equipped to purchase your business.
3. Early Communication Issues
Another common red flag to watch for is that a company says they are interested in buying your business, but the company’s actual decision makers are uninvolved in the communication. If a company is legitimately interested in purchasing your business, you will be communicating with a key player like the President or CEO.
Protect Your Interests
When your business is on the market it is a very important time to make sure that things stay consistent. If a legitimate buyer sees dips in sales or quality of your offerings, it could put a future deal on the line. That’s why you will want to protect your time by not wasting it with buyers who are not a good fit or who lack a high level of interest. Along the way, be sure to trust your intuition. If you sense something might be “off” with a potential buyer, this might very well be the case.
When you work with a business broker or M&A advisor, it will offer you a high degree of protection against falling into a rabbit hole when you should be focusing on keeping your business running as successfully as possible. Your brokerage professional will carefully vet buyers to ensure that they are actually viable candidates.
Copyright: Business Brokerage Press, Inc.
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Sell My Business: How to Sell a Business in 7 Steps
In 2018, 10,312 small businesses were sold. However, many business owners that list their businesses for sale do not ever sell. This is often because they don’t have a transition plan or they try to do it all on their own.
If you are wondering “how do I sell my business”, it is important that you learn the right steps to follow to ensure that you are able to successfully transfer ownership of your business. Do you want to learn more about selling a business and the steps you must take?
Keep reading this article to learn the top seven steps to learn how to your business.
1. Plan for the Future
One of the most important parts of selling your business is planning for the future. It takes a long time to find a reliable buyer, for them to get their finances in order, and to officially sell your business.
Because of this, it is important that you prepare for the sale as early as possible! It is best to plan at least a year or two in advance.
This way, you can find ways to prepare your business structure and customer base for the new owner. It will also allow you to get your business in order before selling.
2. Hire a Business Broker
Once you are prepared to sell your business, you should consider hiring a business broker. While many business owners avoid this to make more money on the sale, it is best to hire a broker if you need help finding a reliable buyer or if you want to get the highest price possible.
A business broker will help you with every step of the business selling process. They can help you find potential buyers, screen them to ensure that they are reliable, and more.
They can also help you find ways to increase your business value before you sell, which will give you a better deal from the sale.
3. Determine the Worth
Before you start marketing your business or find potential buyers, you need to determine the worth of your business. Your business broker can help you with the business valuation process.
You can also find a business appraiser who will provide you with more details about the worth of your business.
This way, you will not price your business too high or too low! It is a great gauge for your listing price and will ensure that you do not get taken advantage of when you are selling your company.
It will also help with the negotiation process and will help you stay firm with your asking price.
4. Make a List of Buyer Prospects
Next, you can make a list of your potential buyer prospects. There are many different places where you can find a buyer for your business.
For example, you may know of a retired business executive that wants to purchase a company. You may even be able to find competitor companies that are looking to expand their brand.
Different buyers will have different motivations for purchasing your company. By working with a business broker, they can help you identify reliable buyers. They will also help you screen the buyers to make sure they are a good fit.
5. Prepare Your Documents
Next, you need to have all of your business documents prepared. This will make the purchase of the business go much more smoothly and will ensure that you have everything you need in one place.
First, you need to get your financial statements and tax documents from the past several years. If you have a business accountant, they will have this information for you.
You should also create a list of information that your new buyer will need. This includes your business contacts, suppliers, your lease agreement, and more.
Having this information for your new buyer will help them understand how you conducted business and will make the transition much more smooth.
6. Market Your Business
Even if you have a few potential buyers that you are interested in, it is still important that you market your business to them. Marketing your business to strategic buyers will increase the likelihood of you selling your business for a good price.
If you know that there are many people interested in buying a business similar to yours, you can use this to your advantage to find many people that want your business.
This may even help you make a bigger profit. A business broker can also help you market your company if you are looking for “how to sell my online business.”
7. Negotiate and Accept an Offer
Finally, the last step of selling your business is to negotiate with your potential buyers! When you have several people interested in buying your business, you will likely get a much better price for your sale.
However, in a buyer’s market, the person purchasing your business has much more control. They may try to talk you into a lower price for your business and may not be willing to pay you as much money.
By negotiating with your buyer, you can settle on a price that works for both of you. Before you accept their offer, you must ask the buyer for a letter of intent and ensure that they are financially qualified to buy your business.
Learn How to Sell My Business Online
When you’re selling your business, you must carefully research the process to get the best deal for your sale. By hiring a business broker and following each of these steps, you will be able to find a reliable buyer!
Have you been searching “how to sell my business” or “help selling my business?” Fusion Advantage can help! Our business brokers can help small and medium-sized businesses find reliable buyers in the St. Louis area.
Contact us today to learn more about our services or to start the selling process.
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When It Comes to Selling Your Business, Let Others Do the Heavy Lifting
While brokerage professionals are working to sell your business, it’s important for you to keep running things in a smooth and seamless manner. In countless cases, sellers have made the mistake of letting things slide simply because they are distracted while trying to sell. You’ll want to make sure things remain the same, as prospective buyers will otherwise start to become nervous. Be sure to keep the premises in tip top condition. Things such as operating hours and inventory levels should remain unchanged. After all, if sales and earnings decrease, that will raise a red flag for buyers.
Business brokers and M&A advisors will help tremendously with various details and events that will take place during the sales process. From start to finish, they will keep their eye on the prize so that you have the time and energy to focus on running your business. The same holds true for other professionals who may help you, such as attorneys and CPAs.
Get Professional Advice on Pricing
You may have a pre-established figure in your mind of what your business is worth and how much you expect to make when you sell. However, the truth is that you will only receive what the market will allow. That’s why it’s so important to get a professional valuation before you decide on a price. If you set too high of a price on your business, it will only slow down or even halt your journey towards successful results.
Keep Things Confidential
Until your sales transaction is completed, you’ll also want to make sure the highest standards of confidentiality are held. If your vendors and employees know that you are selling, it could lead to circumstances that are detrimental to the value of your business. For example, key employees could seek employment elsewhere and/or vendors could terminate contracts.
Decide On Your Strategies
Will you be willing to stay on in some capacity? In many cases, this decision can help increase what you receive for your business. Buyers will often pay more when a seller stays on for a designated period of time as they see this as a reduction in their risk. Would you be willing to offer seller financing? Again, buyers will see this as a sign that you believe in the future success of the business.
Prepare in Advance
It’s always best to prepare when you are not experiencing external pressures. You never know when life could take its toll and force you to sell. That’s why so many sellers start preparing years in advance by taking actions such as cleaning up paperwork, handling litigation and/or environmental issues, and organizing documents.
Selling a business can be highly distracting for business owners. That’s why most reach out to a business broker or M&A advisor. In fact, the best policy is for business owners to start talking to brokerage professionals quite a few years in advance. That way they can make sure everything is optimized for positive results.
Copyright: Business Brokerage Press, Inc.
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